--- title: "Materiality Scrape Clause" description: "Compare single and double materiality scrapes, review six filed agreements, and negotiate breach thresholds and loss limits. Reviewed by a JD." canonical: "https://gc.ai/clauses/materiality-scrape" last_updated: "2026-11-12" --- # Materiality Scrape Clause > Compare single and double materiality scrapes, review six filed agreements, and negotiate breach thresholds and loss limits. Reviewed by a JD. ## Definition A materiality scrape clause tells the parties to disregard specified materiality qualifiers for defined purposes under an acquisition agreement. A breach-stage scrape removes those qualifiers when testing a representation or warranty. A loss-stage, or damages-only, scrape preserves the breach threshold and removes the qualifiers only when calculating losses from an established breach. A double scrape applies at both stages. A single scrape commonly means a damages-only scrape, though usage varies. Knowledge qualifiers address what a party knows and remain separate unless the agreement expressly addresses them. [Goulston & Storrs](https://www.goulstonstorrs.com/insights/article/what-s-market-the-materiality-scrape) explains the different stages and the distinction from knowledge scrapes. The [ABA Carveout Transactions Deal Points Study, page 89](https://www.morganlewis.com/-/media/files/publication/outside-publication/article/2020/m-a-carveout-transactions-deal-points-study.pdf) uses “single” for a loss-only scrape. ## What It Does For in-house counsel, the practical question is which inaccuracies can become claims and how much the buyer can recover. - Removes specified materiality hurdles from the breach analysis when the scrape covers that stage. - Expands the loss calculation after an established breach when the scrape covers damages. - Allows otherwise eligible smaller losses to count toward an indemnity basket, subject to any separate claim threshold. - Changes the disclosure review by requiring the team to test covered representations as the scrape makes them operate. - Preserves the need to prove a covered breach and resulting loss, then apply the remaining recovery limits. A practical test: take an undisclosed issue that falls below a representation's materiality threshold. A damages-only scrape leaves that threshold intact, so the issue alone may establish no breach. A double scrape may change that result. The buyer must still establish an indemnifiable loss and satisfy the applicable basket. The [ABA/Hotshot explanation](https://businesslawtoday.org/2023/04/summary-materiality-scrapes/) walks through this distinction. In _JanCo, LLC v. ISS Facility Services, Inc._, the Delaware Superior Court inserted the MAE definition before applying the scrape to an absence-of-changes representation. That broadened the representation, but the buyer still failed to establish recoverable damages tied to the breach. The decision reflects the agreement and evidence before that court. Read the [primary opinion](https://courts.delaware.gov/Opinions/Download.aspx?id=383920) alongside [Mayer Brown's analysis](https://corpgov.law.harvard.edu/2026/02/11/delaware-case-applying-indemnification-materiality-scrape-creates-risks-for-the-unwary/), which identifies questions about the treatment of exclusions embedded in the MAE definition. ## When You'll See It - **Acquisitions and mergers:** In stock purchase, asset purchase, and merger agreements, a scrape can change the allocation of risk for inaccurate representations. - **Indemnification:** The indemnity article may apply the scrape to breach, loss calculation, or both. Check whose representations it covers. - **Closing and bringdown:** A separate closing condition may disregard qualifiers when testing representations again at closing. An indemnity-only scrape does not automatically reach that condition. - **Disclosure schedules:** A scrape can expose an omission that seemed immaterial when the seller prepared its schedules. Check exceptions for material contracts and other disclosure categories. - **Representations and warranties insurance:** R&W insurance may use its own scrape and coverage rules. Compare the agreement with the policy's exclusions, retention, and limits. [Fasken's analysis](https://www.fasken.com/en/knowledge/2026/04/materiality-scrapes-in-canadian-ma) distinguishes closing-condition scrapes from indemnity scrapes and describes growing use in Canadian transactions. Its jurisdiction-specific discussion does not establish a rule for every acquisition. - Navitas Semiconductor Corporation, Gemini Acquisition LLC, GeneSiC Semiconductor Inc., Ranbir Singh, The Ranbir Singh Irrevocable Trust dated February 4, 2022, and Ranbir Singh as Stockholder Representative - Amedisys Holding, L.L.C., Amedisys Commodore, L.L.C., Contessa Health, Inc., Shareholder Representative Services LLC, and Amedisys, Inc. solely for Section 10.17 - Cree, Inc., Alan J. Ruud, Christopher A. Ruud individually and as Seller Representative, Susan B. Ruud-Stover, Cynthia A. Ruud-Johnson, Theodore O. Sokoly, JZC Legacy Trust, AJR Legacy Trust, Susan B. Ruud Stover Family Endowment Trust, and Susan B. Ruud Stover Living Trust - General R.V. Center, Inc., LDL of Fort Pierce, LLC, Lazydays RV of Longmont, LLC, Lazydays RV of Phoenix, LLC, and Lazydays Holdings, Inc. - PTC Inc. and Rockwell Automation, Inc. - GlobalTech Corporation, 123 Investments Limited, and the Shareholders of 123 Investments Limited - Buyer Positions: - Ask for a double scrape when your position requires disregarding specified qualifiers at both the breach and loss stages. - Identify the covered representations and parties, then decide separately whether any covenants need the same treatment. - Negotiate the basket and any minimum claim threshold together so eligible smaller claims receive the treatment you intend. - Test each proposed carve-out against the representation it preserves, including financial statements and absence of changes. - Compare contractual indemnity with the R&W policy so any difference in scrape scope or available recovery is deliberate. - Seller Positions: - Seek a damages-only scrape if you need materiality to remain part of the breach test. - Preserve agreed treatment for material contracts, financial statements, and absence-of-changes representations through specific exceptions. - Review the full MAE definition, including embedded exclusions, and agree on what survives the scrape. - Negotiate the basket, cap, and survival period against the potential claims created by the scrape, with clear treatment of fraud and other exceptions. - Recheck the disclosure schedules against the final scrape and keep closing-condition standards separate from indemnity standards. ## Red Flags - The provision uses a label such as single scrape without specifying whether it affects breach, losses, or both. - The review treats a materiality scrape as removing knowledge qualifiers or resolving the separate effect of buyer knowledge. - The scrape reaches an MAE definition or disclosure category without clear treatment of embedded exclusions and express carve-outs. - The indemnity analysis assumes the same scrape governs bringdown conditions or the buyer's obligation to close. - The recovery analysis skips the basket, minimum claim threshold, cap, survival period, or insurance policy, or assumes breach alone proves damages. ## FAQ ### What is a materiality scrape? A materiality scrape is a contract provision that disregards specified materiality qualifiers for an agreed purpose, such as testing a representation or calculating indemnifiable losses. Its effect depends on the covered provisions, the stage where it applies, and any express exceptions. ### What is the difference between a single and double materiality scrape? A single, or damages-only, scrape preserves materiality when deciding whether a breach occurred and disregards it when calculating losses from that breach. A double scrape disregards specified qualifiers at both stages. Because terminology varies, check whether the provision addresses breach, loss calculation, or both. ### Does a materiality scrape remove knowledge qualifiers? No, unless the agreement expressly addresses knowledge as well. Materiality concerns significance; knowledge concerns what the specified person knows or must investigate. Check the knowledge definition and the scrape separately. Buyer knowledge and sandbagging provisions present an additional issue. ### Can a materiality scrape affect closing or bringdown conditions? Yes, if the closing condition or another applicable provision expressly applies it there. A bringdown condition tests representations again at closing. A scrape limited to indemnification does not automatically change that test. Read the condition's own materiality standard and any separate material adverse effect condition. ### How do baskets, caps, carve-outs, and R&W insurance limit a materiality scrape? A basket sets the threshold for eligible claims and a cap limits recovery, subject to their exceptions. Carve-outs preserve specified qualifiers or provisions. Survival and notice terms restrict when claims may proceed. Representations and warranties insurance has separate coverage terms, exclusions, retentions, and limits. A scrape does not automatically override these restrictions.